Royal Bank of Canada (NYSE: RY) seems to be ready for an upmove according to its latest charts. Royal Bank of Canada is a Canadian multinational financial services company and the largest bank in Canada by market capitalization. The bank serves over 16 million clients and has 86,000+ employees worldwide.
Bullish Indications
#1 Double Bottom Pattern Breakout: As you can see from the daily chart below, the stock had recently broken out of a double bottom pattern. This is marked in purple color. A double bottom pattern is a bullish reversal pattern, and a breakout from it indicates that the stock could move upwards.
RY – Daily Chart
#2 Price Above MAs: The stock’s daily chart shows that the price is currently above the 50-Day SMA as well as 200-day SMA. This shows the strength of the bulls.
#3 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#4 Bullish MACD: The MACD line is above the MACD signal line, indicating possible bullishness.
#5 Bullish ADX and DI: The ADX line is currently above the -DI line and moving higher, and the +DI line and the ADX line are also above the -DI line. This is a possible bullish indication.
#6 Flag Pattern Breakout: As you can see from the weekly chart, the stock was in a strong uptrend, after which it started consolidating and was in a narrow range. This is a classic flag pattern and is marked in the chart below in pink color. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the flag pattern, which is a possible bullish sign. The stock is also trading above its 50-week as well as 200-week SMA, indicating that the bulls are currently in control.
RY – Weekly Chart
#7 Bullish Stoch: The weekly chart shows that the %K line is above the %D line, which is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for RY is above Friday’s close, at around $108.00.
TP: Our target prices are $116 and $122 in the next 3-6 months.
SL: To limit risk, place a stop loss at $103.20. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 7% to 13% in the next 3-6 months.
For a risk of $4.80, our target rewards are $8.00 and $14.00. This is a 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks with high volume from the flag pattern and double bottom breakout levels. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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